NPR Story

5:06 am

Wed May 7, 2014

Chinese E-Commerce Giant To Offer U.S. IPO

A Chinese e-commerce giant filed for an initial public stock offering yesterday. Alibaba - which has no exact equivalent in the U.S. - will, however, conduct its IPO here. And it's expected to raise billions. The IPO could be the biggest since Facebook back in 2012. To learn more about Alibaba, we turn to NPR's Frank Langfitt, who's in Shanghai. Good morning.

FRANK LANGFITT, BYLINE: Good morning, Renee.

MONTAGNE: So exactly what is Alibaba?

LANGFITT: Well, you're right to point out there is no real equivalent in the United States. It's almost like a combination of companies. Just some examples. It has a platform called T-mall, which is a virtual shopping mall. Name brand companies like Gap and North Face sell to consumers there. There's also a person to person sales platform called Taobao, which is a lot like e-Bay.

And then there's a huge e-payment platform called Alipay is like Paypal. So it's at least three companies in one. And because e-commerce is huge here, and Alibaba has so much of the market, net income last year was about $3.5 billion.

MONTAGNE: So it is huge. What is the company's back story?

LANGFITT: It's a great story and I think most Chinese know it very well. A guy named Jack Ma, he's a former English teacher, he started the company in an apartment in Hangzhou in 1999. That's not far from Shanhai. And Ma's a highly strategic guy and he really made his name by outflanking and outsmarting e-Bay here.

And he even marketed that competition as kind of a David and Goliath story which really appealed to Chinese pride. He's also a big personality, great sense of theater. At one company event - it was in an area, I've seen video of this - he rises out of stage. He's wearing sunglasses, giant white wig, fake nose ring, and a Mohawk.

And of course, this is not the traditional Chinese CEO but Alibaba workers loved it.

MONTAGNE: And it sounds like you can buy quite a few things on Alibaba. What are Chinese people buying?

And one of the reasons that e-commerce seems to work really well here is delivery is really reliable. I'll give you an example. Last year, I bought a refrigerator online in the afternoon. The next morning a shirtless worker shows up at my apartment door. He's got the refrigerator. He's on time. There's no delivery charge, and he refuses a tip. Which is kind of tough to beat.

MONTAGNE: But one thing, Frank. Considering that China is awash in counterfeit products, has that been a problem for Alibaba?

LANGFITT: Definitely. And of course, whenever you buys something in China, it's always a risk that you're going to run into fakes. There's a folding bike maker in the U.S. who estimates about half of its brand name bikes that are sold on Taobao are fakes. Alibaba knows this is a problem. It's removed like tens of millions listings from people selling knockoffs.

And there are protections. Taoboa usually will hold the money, make sure a customer is satisfied before releasing the money to the seller.

MONTAGNE: And just one last thing. China's growth is slowing now. The Internet sector there is incredibly competitive. What kinds of challenges does, big as it is, Alibaba face?

LANGFITT: Well, it is an incredibly competitive marketplace. Right now Alibaba is fighting with another Internet company, 10 Cent, for customers for online payment platforms. And you're right. The economy right now, there's a lot of uncertainty. There are a lot of empty buildings in real state sector, mountains of corporate and local government debt.

But a real big change from when Jack Ma started this company is there's a strong consumer culture now in China, and I think Alibaba is banking that that's just going to continue.